SINGAPORE: Oil prices were down in Asia on Monday ahead of a US interest rate decision, with weak demand in an oversupplied market keeping a lid on any gains.
US benchmark West Texas Intermediate for October delivery was down 11 cents at $44.52 and Brent crude for October fell 37 cents to $47.77 in afternoon trade.
The cost of the black gold tumbled last week after Goldman Sachs slashed its price forecasts for next year in the face of a larger-than-expected glut.
Sanjeev Gupta, head of the Asia Pacific oil and gas practice at professional services firm EY said prices will remain volatile on concerns “over demand growth not being sufficient to absorb excess supply.”
Weak demand from China, the world’s top energy consumer, is also weighing on the market, he said, following another round of weak data on the world’s number two economy at the weekend.
Gupta said dealers are focusing on the Federal Reserve’s rate meeting, which ends Thursday.
While expectations are for a rise by the end of the year, the bank’s decision has been complicated by the recent turmoil across the globe caused by the Chinese economic crisis.
Higher US interest rates will boost the US currency, making dollar-priced oil more expensive for holders of other units, hurting demand and prices.
“For now, the market appears willing to give in to the Fed’s well telegraphed intention to hike in 2015 but remains doubtful of more hikes thereafter,” DBS Bank said in a market commentary.
“The [dollar]could reassert itself if Fed Chair Janet Yellen turns out to be more optimistic than expected and reinforces her colleagues’ recent message that the Fed will be gradual and cautious in normalizing monetary policy.”
Oil prices have plunged from peaks of more than $100 a barrel in June 2014 as global supply outpaced demand.